Cut Putin’s pipelines to Europe

Vladimir Putin’s continued invasion of Ukraine has prompted Europe to impose sanctions on Russia at a pace that would have seemed unthinkable even in 2014, after Putin ordered the annexation of Crimea. These sanctions are far from complete embargoes on Russian oil and natural gas. In recent weeks, however, the European Union has proposed a complete ban on oil imports from Russia. The plan still needs to be unanimously approved by its member states, many of which are heavily dependent on Russian oil. Natural gas imports seem even less likely to be banned. (America has imposed an embargo on Russian oil and natural gas for the past two months.)

To discuss the energy situation in Russia and Europe, I recently spoke by phone with Helen Thompson, professor of political economy at the University of Cambridge and author of the new book “Disorder: Hard Times in the 21st Century.” A story of how politics has gone off the rails in many countries since 2016, Thompson’s book seeks in part to connect these cracks to the energy crisis of the 1970s, when a combination of factors, such as declining production of oil in the United States and turmoil in the Middle East after the Yom Kippur War in 1973 led to supply shortages and price spikes. During our conversation, which has been edited for length and clarity, we discussed structural and political barriers to outright European bans on Russian oil and gas, what rising energy prices could mean for the fight against climate change and potential societal shocks. which can accompany high consumption costs.

What about Europe’s potential embargo on Russian oil? I know Hungary and Slovakia and a few other countries are questioning that. Where do you think this is heading?

It’s hard to say where this is heading at the moment. But I don’t think it’s going very far, very quickly. The problems with Hungary are quite serious, as Hungary is a landlocked country. We could see this through the prism of Hungary trying to use energy sanctions to obtain concessions on other issues, including rule of law issues. But I think Hungary really has a serious problem. It is not easy for her to replace Russian fuels with maritime oil and gas.

If there was an easy solution to this – something that could be offered to Hungary to change Orbán’s mind – it probably would have happened. There is no proof of this. This may touch on a deeper issue, which is Russia’s loss of refining capacity, which will affect not only Europe but also the United States.

Is it partly because Orbán and Putin enjoy a close relationship, despite historical conflicts between Hungary and Russia? Or is it because Hungary gets much of its oil and nearly all of its gas from Russia? Or is there actually less distinction to be made between these two things?

It’s a mix of things, but ultimately the energetic explanation is more important than the other explanations. If you look at the very beginning of the war, Orbán actually reacted much more critically towards Russia than many had anticipated. I don’t think, from what we hear anyway, that he is opposed in principle to energy sanctions. Although he is likely to have a less divisive view of Putin than the Baltic leaders or the Polish prime minister.

The heart of the problem is Hungary’s difficult energy situation. It depends on Russia’s oil and gas pipeline. Its oil refineries can mainly only process Russian crude exports, so it will be very difficult to find alternatives for Hungary for a short period, even a year or so. And that’s leaving aside the impact on the wider global market. For other EU countries, that is to say not only for Hungary and those who have clearly resisted the energy sanctions proposed by the European Commission, this becomes a more general problem.

My feeling is that oil sanctions against Russia would be serious but not completely crippling for them, but natural gas sanctions or a natural gas cut could really be crippling. Can you describe why?

The main reason why natural gas is such an important market is that a large amount of natural gas is transported from Russia to the European Union via pipelines, rather than by sea. This is a particular problem for Germany, which currently does not have the capacity to import liquid natural gas. She remains absolutely committed to her relationship with Russia and to the gas pipeline. Europe is also more dependent in terms of the absolute volume of gas imports it takes from Russia.

Before the start of the war, in the last months of 2021, a very serious gas shock was already underway for European countries. Gasoline prices reached a very, very high level around the turn of the year. The war, as far as gas is concerned, entered into a pre-existing crisis. There were some difficulties with oil in the latter part of last year, but they were not comparable to the situation that European countries faced with gas.

So I imagine that while it will be difficult for the EU to make this oil cut work, a natural gas cut would be even more difficult.

Yeah. I think even the staunchest proponents of the oil embargo realize that gas is a whole different level of difficulty.

I read a quote from a former economic adviser to Putin who said that natural gas is also much more important to Russia and that the war could really end if the natural gas was cut off. Why is natural gas so much more important to Russia, if you agree?

I think it’s a trickier question, actually, from Russia’s point of view, because in terms of real revenues from oil and gas exports, oil revenues are considerably higher than gas revenues . I think the reason it would be a bigger blow is that European countries are more dependent on Russian gas than its oil. Part of that reflects the issue of pipelines and being tied to those pipelines. If you look at Putin’s behavior in the 20 years before the war, you can see that he was using gas as a geopolitical weapon. He was using gas as the main way to tie European countries into this energy relationship with Russia. But, financially, oil is a big problem for Russia.

In your book, you relate some of today’s political issues to energy issues. Why do you think this link is important?

There are several theses in the book, but, in terms of energy, I wanted to show the ongoing story of geopolitical disruption around energy taking a particular turn in the 1970s when we moved away from the world European imperial and the United States. for a time became the largest importer in the world.

I wanted to look, at the same time, at how these energy shocks have played out in the global economy, and particularly for western democracies in the forty or fifty years since the seventies. A number of the disturbances that have manifested themselves in the Nineties have had a history in these longer disturbances, both economically and geopolitically, some of them having spillover effects in terms of democratic politics.